Who And What Is Involved In The Mortgage Process?

BUYING A PROPERTY?

BUYING A PROPERTY?

Buying a house is a very exciting time. The good news is that if you do the groundwork and set the right wheels in motion you can be in your own house in a quite short time. The bad news is that you can expect that there will be lots to do before you get there. In most countries, a mortgage is the primary way that prospective homeowners have of buying a house, flat or land on which to build a property, collectively called real estate. This type of mortgage is called a residential mortgage or home loan. They are most often taken up by individuals or couples.

Mortgages are also commonly used to for commercial property, such as offices, factories, retail outlets or building containing multiple units such as office blocks, shopping malls and warehouses. This type of mortgage is called a commercial mortgage or commercial property loan. They are most often taken up by businesses rather than individuals, although individual investors may also purchase commercial property.

Mortgages nowadays are typically associated with real estate, although they did historically cover property in general, including crops, factory equipment, ships and trains. The term mortgage derives from the French term 'dead pledge'. This means that the mortgage agreement ends when the loan is paid off, or when the property is taken into foreclosure. In most legal systems, the borrower has legal right to the real estate, but the lender has legal rights to enforce ownership of the security if the loan falls delinquent, for example to sell the property or take ownership and rent it out.

Who and what is involved in the Mortgage Process?

The main components of the mortgage process that we need to understand:

Mortgage Lender- A mortgage lender is characteristically a bank, credit union, building society or other form of financial institution.

Borrower- That is probably you - the person looking to borrow money to fund a purchase.

Mortgage Broker- Not to be confused with a lender. A mortgage broker helps prospective buyers to find the best mortgage deal for their needs, to compile the paperwork and complete the mortgage application process.

Option to Purchase- It is common for a property seller to sell your an option to purchase a house, at an agreed price. This option has a set expiry date, and will include a payment, often set as 1% of the final purchase.

Mortgage Down Payment- In most property purchases, the buyer will need to pay some of the total cost them. It is worth noting that in the boom years of 2001 - 2007, many lenders in developed markets where offering mortgages that covered the total cost of the purchase, or in extreme cases up to 125% of the real estate sale price. This was based on the assumption that property prices would continue to rise dramatically.

It is common now for 10% - 40% down payments to be required.

Annual Percentage Rate (APR) - In order for a bank to lend your money, they need to make some money out of the transaction. They do this mainly by charging an interest rate. This is expressed as the Annual Percentage Rate or APR.

by: non conforming loans

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